How much can I pay into my SIPP?

toesonthenose

I would like to know how much money I can pay into my SIPP?

This tax year my only source of income is from a separate Defined Benefits Pension and I am a basic rate tax payer.

I am well within the Lifetime Allowance taking account of the DB and DC pensions so do not need to worry about getting to this limit for my total contributions.

I am selling a 2nd property this tax year which I have previously rented out and will not earn any income on it this year – for tax purposes I will make a small loss. I funded the purchase of this property about 12 years ago through savings from my and my husbands income. The property is jointly owned.

I have not crystallised any of the funds in my SIPP and do not intend doing so this tax year.

Can I use the cash freed up from my property sale to put into my SIPP and if so how much?

stoozie1

toesonthenose wrote: »

This tax year my only source of income is from a separate Defined Benefits Pension and I am a basic rate tax payer.

Can I use the cash freed up from my property sale to put into my SIPP and if so how much?

Because of your earnings, you can pay a max of £2880 net/£3600 gross p.a into your SIPP.

xylophone

In terms of tax relief for a person with no relevant earnings, the above is correct.

However,

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/tax-relief-and-contributions

If you don’t have any earnings (for example, if you don’t work) or earn less than £3,600 each year, you can make gross contributions of up to £3,600 each year to a personal pension, self-invested personal pension, or stakeholder pension receiving basic rate income tax relief at, currently, 20% on your contribution. You can pay in higher amounts than your maximum limit, but you don't receive tax relief on the excess amounts.

That said, it may be that your provider's systems are set up to claim basic rate tax relief on personal contributions and contributions ineligible for tax relief would not be accepted.

You would have to discuss your situation with your provider.

Linton

But if you dont get tax relief coming in and do pay the tax on withdrawals perhaps there are better places for your money. An S&S ISA would give you the tax benefits of a SIPP but none of the tax downsides.

Albermarle

Obviously though without tax relief , the attraction of putting extra money in a pension disappears , as you will still pay tax when taking income from it . So would be a negative benefit .
In normal circumstances would be better to invest the money from the property sale outside a pension.
Only if you potentially have an inheritance tax issue could there be an argument for putting money in a pension without tax relief.

toesonthenose

Thanks all.

Of course as you say its not just what you put in but what you take out. In my case as a pension is merely a tax deferral system, there is no benefit as I get the 20% top up but then pay the 20% when I take it out. The only gain I would make is if I take the 25% of the total tax free, ie 25% of the £720-.

As suggested by Linton putting in an ISA would lock in any future capital gain or income as tax free.

Who knows what the next government might do with tax rates!

Thanks again all.

xylophone

Re benefit of paying non tax relieved contribution,

https://forums.moneysavingexpert.com/discussion/6038243

why would you wish to contribute more to your pension than yields tax relief?

Pension money is not normally part of a person's estate so there can be an inheritance tax benefit.

Albermarle

would make is if I take the 25% of the total tax free, ie 25% of the £720-.

Yes the benefit is only £720 if you are not paying tax in retirement . However this does apply to many people , especially before the state pension kicks in , and the £720 is a useful extra for some people.

I think , like you , many better off people in retirement , can't be bothered with adding £2880 to a SIPP each year just to gain £180.